Re-inventing Supply Chains: From Automation, to Integration, to Collaboration
Background: Historical pressures and emerging trends
Historical Pressures
Enterprises today face a common set of problems and pressures. Most of them can be identified as being related to operational efficiency, customer intimacy, and product differentiation.
Essentially, operational efficiency means cutting costs while maintaining quality. The supply chain can play a critical role in driving costs downward, if it is managed properly. The very uncertainty of supply and demand and the corresponding need to stay connected with players up and down the chain has made Materials Resource Planning and Supply Chain Management tools so essential.
By building better products designed to satisfy ever more narrowly-defined demand, enterprises develop intimacy with customers. To do this, enterprises must keep track of customer preferences with greater precision, generating metrics as they happen, not at quarter's end. This has been the traditional mission of Customer Relationship Management tools.
The main drivers of competitive advantage today relate to product differentiation. Innovative products that fulfill needs that customers didn't even know they had, or products that fulfill perceived needs in new ways, create a "somebody understands me" psychology which translates directly to brand loyalty. This demands higher focus on product design and marketing, which further reinforces the need to outsource execution and delivery.
Emerging Trends
As they deal with these challenges, breakthrough enterprises will find ways to turn other underlying trends in the business environment to their advantage. Pervasive computing and ubiquitous bandwidth represent a rare opportunity - to finally realize the promise of the virtual corporation, so often touted since the 80's. No longer must people and company operations be co-located; they can exist anywhere that computers and Internet services can reach. Yet they can interact as though were in the same well-equipped room, with every business, research, visualization and decision-making tool at their fingertips.
The current labor shortage and an abundance of cash are other drivers that push companies toward outsourcing. Along with lower transaction costs, the inability to staff non-core departments easily that leads decision-makers in the direction to utilize other enterprises' core mission strengths. These trends, along with the realities of B2B and B2C e-commerce have led to increasingly elaborate partnership alliances and increased interdependence between enterprises.
How have enterprises dealt with these problems? In the last 15 years, the prevailing business vision has moved from a company-centric concept to one that includes partners who not only reduce overhead but bring additional resources and revenues.
The Evolution of Business Models: from Model T to Enterprise Consulting
Figure One: The Quadrant
- Single enterprise, mass-produced: the Model T Ford
- Single enterprise, mass-produced: Chemicals
- Multiple enterprise, mass-produced: Microprocessor fab/design/assembly
- Single Enterprise, Mass-customized: Furniture
- Multiple enterprise, mass-customized: ASICs
- Multiple enterprise, mass-customized: Consulting services
- Multiple enterprise, mass-customized: Most technology (Dell, Compaq, etc.)
The world is moving from single enterprise mass production to multiple enterprise customization. Why? The strengths strategic alliances afford: higher margins, shorter development cycles, higher quality, lower overall costs. The ability to meet demand on a single-customer basis..
Overall we can categorize all companies that deliver products and services in an x/y matrix defined by degrees of partnering, and degrees of product customization. At the lower left are companies that build products or deliver services within a single enterprise (such as chemical manufacturers). At the lower right are enterprises that require multiple enterprises to build their solutions (such as most high-tech manufacturers).
Vertically, the matrix describes products and services that are mass produced (memory chips), mass customized (routers), as well as those that are fully customized (management consulting services). The trend is away from mass-produced, single-enterprise models and towards mass-customized multi-enterprise model. For example, car manufacturers are already using the multi-enterprise model and are trying hard to start building to order.
But the migration doesn't happen all at once. Most enterprises evolve gradually, partnering and customizing in increments, from automation, to integration, to collaboration.
The amount of collaboration required grows as enterprises migrate from lower left to upper right. How well they are able to share information, resolve issues, react to rapidly changing situations becomes the single most important factor in their ability to dominate their markets. As the number of players increases, so does the critical importance of providing them with information and enabling action related to it.
A good example is C-Commerce. By now, most forward-looking experts agree that B2B will give way to C-Commerce, with its "dynamic collaboration among employees, business partners and customers throughout a trading community or market." (Gartner Group, "C-Commerce: the New Arena for business Applications" 10/99, see also Credit Suisse, Southwest Securities, EDS, Gort). Currently, eBusiness is highly focused on the transaction level. C-commerce is creating a framework that links supply partners together and enables them to exchange insight. In this multiple-enterprise environment characterized by a high dependence upon information, collaborative tools become a vital form of competitive differentiation.
The Evolution of Business Tools
Figure Two: The Quadrant: Tools of the Trades
Technology that helped enterprises in the lower-left quadrant improve was called "Materials Resource Planning," or "MRP" tools; but was subsequently renamed "Enterprise Resource Planning," or "ERP" tools an escalation of title meant to reflect their more inclusive nature. But at a certain point within this evolution, as other enterprises became involved, enterprises needed to keep track of the growing numbers of suppliers and partners. At that point, Supply Chain management (SCM), and logistics software applications became factors in the equation. In this left-to-right trend, we see the emergence of marketplaces, both public and private, connecting multiple buyers and suppliers in a new market space. The operative word is market "places," actually a virtual location created by the enabling tools themselves.
E-commerce applications and e-marketplace applications are the vehicles driving the vertical evolution as well. Their initial success with MRP products puts them in the lower right hand quadrant. However, as enterprises began building products that varied from customer to customer (furniture manufacturers are a good example), they needed software to keep track of customer preferences and purchases. This is where the "Customer Relationship Management," or "CRM" applications came into play. This evolution created a new way to use customer information to create more business, spawning a new virtual market "place" which features high degrees of product customization.
As enterprises move towards mass customized or fully customized products across multiple enterprises, which exhibit increasingly shorter life cycles and larger and more fluid supplier networks, we come into the realm of "Professional Services Automation," or "PSA" solutions for services companies and "Product Lifecycle Management" or "PLM" solutions for manufacturers. These tools have enabled the sort of highly-customized, multiple-enterprise activities inherent in the consulting workplace.
At the core of these applications is the new "digital workplace." - a framework of integrated collaborative capabilities where work gets done. By now it should be clear that the world is moving from single enterprise mass production to multiple enterprise customization. But why? The strengths strategic alliances afford: higher margins, shorter development cycles, higher quality, lower overall costs. The ability to meet demand on a single-customer basis creates the illusion of single-customer service, with the efficiency of mass production.
The risk is that it takes accurate, timely information, and the ability to act upon that information, to break through the barriers to success. The solution can be found in digital workplaces which provide a platform for collaboration, regardless of time zone, distance, or number of players
eRoom: from integration to collaboration
eRoom Technologies' e-collaboration suite targets specific supply chain processes where structured information is augmented by rich media, desktop objects and engineering data to create dynamically configurable workflows. It moves beyond mere integration, to help participants act upon the information they are receiving.
eRoom provides both the place for joint design of new products and services, as well as the means to deal with problem transaction. It's the place for ad-hoc collaboration between all the players in the process. That includes suppliers of components, materials, and services; partners in new initiatives dependent upon the supply chain for their success; and even customers. After all, a critical element in the new economy is being able to manage its relationships with customers.
The latter critical. eRoom can help provide better visibility in the overall value chain, both from the demand side as well as from the supply side. This type of collaborative marketplace not only facilitates supply and demand aggregation but also helps to incorporate value-added services throughout the supply and demand chain.
The City as Supply Chain, and Vice-Versa
Think of New York City as a vast corporate entity requiring a massive supply chain to keep it running. Planning this supply chain in a centralized manner simply would never work; the complexities are too enormous. All the sub-entities - the shops, restaurants, services, transportation net, etc. - must organize themselves, following simple, self-generated rules to predict demand and order to ensure there is stock to meet it. In complex supply chains, ad hoc self-organization between members of the value chain is essential, adding flexibility and predictability to the overall process.
eRoom follows the same principle. Rather than a monolithic, rigid plan that ends up being self-defeating, eRoom works in conjunction with existing corporate resources and systems. This very flexibility is its strength. Rather than re-inventing best practices, it augments them and disseminates them across the enterprise and the supply chain. It becomes the communications and transportation grid, as well as the delivery mechanism for collaboration.
By integrating people and automated processes using shared digital workspaces, eRoom enables all team members to harvest for reuse the details of execution that drive agile supply chains. Leveraging this untapped body of intellectual capital saves time and money, making best practices the baseline for newly formed partnerships in the supply chain.
